HUD Announces Program to Help Borrowers Bridge Housing Payments
One billion dollars in emergency funds will soon be available to helprnhomeowners “bridge” their mortgage payments while they recover fromrnthe impact of a severe income loss. ThernDepartment of Housing and Urban Development (HUD) will make the funds available</ato homeowners in Puerto Rico and the 32 states not covered by the Department ofrnthe Treasury's Innovation Fund for Hardest Hit Housing Markets program. </p
The assistance will be in the form of a declining balance, deferred payment “bridge loan”
which can be used to bring mortgage, taxes and insurance payment current and make payments going forwardrnfor up to 24 months. The funds will be provided under the Emergency HomeownersrnLoan Program (EHLP), portion of the Dodd-Frank Wall Street Reform and ConsumerrnProtection Act and will be allocated to the individual states and Puerto Ricornbased on each states proportional share of national unemployment measures asrnapplied to homeowners.</p
To be eligible for the program a household mustrnhave had an income, prior to the event which caused the delinquency, equal tornor less than 120 percent of the Area Median Income (AMI) and a post-eventrndecrease in income of at least 15 percent. The homeowners must be at leastrnthree months delinquent on mortgage payments on their principal residence andrnhave either received a foreclosure notice or be able to self-certify to thernlikelihood that they will be foreclosed due to the delinquency. </p
The household must have a reasonable likelihood ofrnresuming payments on the mortgage and meeting other housing expenses and debt obligationsrnwithin two years. This determinationrnwill be based on a back-end ratio below 55 percent of pre-event income. </p
Once all arrearages are brought current, thernhomeowner must make monthly payments on the first mortgage based on 31 percentrnof the household’s gross income at application. rnThe minimum acceptable monthly payment will be $25. The balance ofrnprincipal, interest, taxes, and hazard insurance will be paid by the program onrnthe homeowner’s behalf. </p
The assistance will be phased out over a two monthrnperiod if the household’s gross income at any time increases to more than 85rnpercent of its pre-event level and assistance will end when the household reachesrneither the $50,000 limit the end of the 24 month term. Other events that will terminate thernassistance are a failure to report a change in employment status or income,rnfailure to make monthly payments, or selling or refinancing the home. </p
The homeowner will execute a 5-year declining promissoryrnnote to HUD at the unset of the program for a declining balance, zero interest,rnnon-recourse loan for the approximate value of the estimated assistance. Thernloan will be secured by a junior lien on the property. No payment will be required on the noternduring its 5-year term as long as the homeowner maintains the property as arnprincipal residence and keeps the first mortgage current. If these conditions are met, the balance ofrnthe loan will decline by 20 percent annually until the note is extinguished andrnthe junior lien is released.</p
At all states of the program “underwater” homeowners will be encouraged to explore participation in short sale or short-refinancing programs offered by their servicers and/or the federal government.</p
HUD will administer the program either by delegating some administrative functions or by channeling the funds through state housing finance agencies (HFAs). Delegated entities will be required to perform outreach, intake, eligibility screening, and counseling; a fiscal agent will be assigned to manage and distribute funds. HUD will provide information that identifies pockets within each of the designated states that have suffered the most from recent spikes in unemployment and/or mortgage delinquencies and will encourage the use of program dollars in these hardest-hit areas. The Department intends to begin taking applications from eligible homeowners by the end of the year.</p
Below are the complete guidelines as published by HUD…</p
HERE is the HUD release</p
There will be a dual delivery approach for program administration. The first approach will delegate some of the program administrative functions to designated third parties. The second approach will enable state housing finance agencies (HFAs) that operate substantially similar programs to engage in relief efforts on behalf of residents of their state.
1. Program Administration — Delegated approach: HUD will delegate key program administration functions to separate external entities, while retaining program monitoring, compliance and long term note management functions internally. Delegations include:</p
Counseling Intermediary to Perform Intake, Eligibility Screening, and Outreach. HUD will enter into a cooperative agreement with NeighborWorks® America to have nonprofit housing counselors who are part of the National Foreclosure Mitigation Counseling Program administered by NeighborWorks® America to provide intake and outreach services.</p<ul
2. Program Administration — Substantially similar state law approach: State HFAs that operate loan assistance programs that are determined by HUD to be substantially similar to the EHRF program will receive allocations to fund emergency loans for borrowers in their states as well as payments to cover the administrative costs of performing the intake and housing counseling and fiscal agent functions (described above) directly or indirectly through subcontracts with third parties.
Allocation of Program Funds</p<ul
Homeowner Eligibility and Program Operation
Income Thresholds: Has a total pre-event household income equal to, or less than, 120 percent of the Area Median Income (AMI), which includes wage, salary, and self-employed earnings and income.
Significant Income Reduction: Has a current gross income that is at least 15 percent lower than the pre-event income.
Employment type: Both wage and salary workers and self-employed individuals are eligible.
Delinquency and Likelihood of Foreclosure: Must be at least three months delinquent on payments and have received notification of an intention to foreclose. This requirement can be documented by any written communication from the mortgagee to the homeowner indicating at least three months of missed payments and the mortgagee’s intent to foreclose. In addition, the homeowner can self-certifiy that there is a likelihood of initiation of foreclosure on the part of their mortgagee due to the homeowner being at least three months delinquent in their monthly payment.
Ability to Resume Repayment: Has a reasonable likelihood of being able to resume repayment of the first mortgage obligations within 2 years, and meet other housing expenses and debt obligations when the household regains full employment, as determined by:</p<ul
Principal Residence: Must reside in the mortgaged property as principal residence. The mortgaged property must also be a single family residence (1 to 4 unit structure or condominium unit).
Creation of HUD Note: After the first assistance payment is made on behalf of the homeowner, the fiscal agent will create an open-ended “HUD note” and a mortgage to be in the name of the Secretary HUD of sufficient size to accommodate the expected amount of assistance to be provided to homeowner.
Ongoing Qualification of Homeowner
Termination of Monthly Assistance: Assistance is terminated and the homeowner resumes full responsibility for meeting the first lien mortgage payments in the event of any of the following circumstances:</p<ul
Income re-evaluation: After initial income verification at application intake, the homeowner shall be required to notify the fiscal agent of any changes in the household income and/or employment status at any point throughout the entire period of assistance.
Forms of Assistance
Use of Funds for Arrearages: On behalf of the homeowner, the fiscal agent shall use loan funds to pay 100% of arrears (mortgage principal, interest, mortgage insurance premiums, taxes, hazard insurance, and ground rent, if any).</p
Homeowner Payments: Homeowner contribution to monthly payment on first mortgage will be set at 31 percent of gross income at the time of application, but in no instance will it be less than $25 per month.</p
Use of Funds for Continuing Mortgage Assistance: The fiscal agent will make monthly mortgage payments to the servicer of the first lien mortgage in excess of the payments made by the homeowner.
Duration of Assistance: If at any time the household’s gross income increases to 85% or more of its pre-event level, assistance will be phased out by the fiscal agent over a two month period. In any event, assistance with monthly payments may not continue beyond 24 months.
Transition Counseling: The designated counseling agent shall contact each homeowner that is approaching the last months of program eligibility and remains un/underemployed (3-6 months before the assistance ends) and require the homeowner to meet with a HUD approved counseling agent to explore other loss mitigation options, including loan modification, short sales, deeds-in-lieu of foreclosure, or traditional sale of home.
Repayment of HUD Note: Following the last payment on behalf of the homeowner, the fiscal agent will process the homeowner’s “HUD Note” and record a mortgage with a specific loan balance. The note and mortgage will be in the form of a five year declining balance, zero interest, nonrecourse loan, and the mortgage shall be in the form of a secured junior lien on the property.
Terms for Declining Balance Feature: No payment is due on the note during the 5 year term so long as the assisted household maintains the property as principal residence and remains current in his or her monthly payments on the first mortgage loan. If the homeowner meets these two conditions, the balance due shall decline by twenty percent (20%) annually, until the note is extinguished and the junior loan is terminated.
Events Triggering Note Repayment: The homeowner will be responsible for repayment of the applicable balance of the HUD note to the fiscal agent or its successor, if, at any time during the five year repayment period, any of the following events occur:</p<ul
Provisions for Underwater Homeowners: At all stages of the program, “underwater” homeowners will be encouraged to explore participation in short sale or short refinancing programs offered by their servicer and/or the federal government (i.e. Home Affordable Foreclosure Alternatives) , which will not trigger repayment of the HUD note. </p
Borrowers living in the following jurisdictions are eligible to receive funds….</p
All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of MortgageNewsDaily.com is prohibited.
By John Gittelsohn August 24, 2020, 4:00 AM PDT Some of the largest real estate investors are walking away from Read More...Late-Stage Delinquencies are Surging
Aug 21 2020, 11:59AM Like the report from Black Knight earlier today, the second quarter National Delinquency Survey from the Read More...Published by the Federal Reserve Bank of San Francisco
It was recently published by the Federal Reserve Bank of San Francisco, which is about as official as you can Read More...
Leave a Comment